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Allowance for Credit and Loan Losses | 12 Months Ended
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Dec. 31, 2020
Receivables [Abstract] |
Allowance for Credit and Loan Losses | Allowance for Credit and Loan Losses The following tables represent, by loan portfolio segment, a summary of changes in the ACL on loans for the twelve months ended December 31, 2020.
| Twelve Months Ended December 31, 2020
| Commercial |  | Real Estate |  | Mortgage Warehouse |  | Consumer |  | Total
Balance, beginning of period | $ | 11,996 |  |  | $ | 923 |  |  | $ | 1,077 |  |  | $ | 3,671 |  |  | $ | 17,667 |
Impact of adopting ASC 326 | 13,618 |  |  | 4,048 |  |  | — |  |  | 4,911 |  |  | 22,577 |
Provision for credit losses on loans | 19,198 |  |  | (184) |  |  | 190 |  |  | 1,547 |  |  | 20,751 |
PCD loans charge–offs | (2,105) |  |  | — |  |  | — |  |  | — |  |  | (2,105) |
Charge–offs | (653) |  |  | (204) |  |  | — |  |  | (2,169) |  |  | (3,026) |
Recoveries | 156 |  |  | 37 |  |  | — |  |  | 970 |  |  | 1,163 |
Balance, end of period | $ | 42,210 |  |  | $ | 4,620 |  |  | $ | 1,267 |  |  | $ | 8,930 |  |  | $ | 57,027 |
The Company utilized the Cumulative Loss Rate method in determining expected future credit losses. The loss rate method measures the amount of loan charge–offs, net of recoveries, (“loan losses”) recognized over the life of a pool and compares those loan losses to the outstanding loan balance of that pool as of a specific point in time (“pool date”). To estimate a CECL loss rate for the pool, management first identifies the loan losses recognized between the pool date and the reporting date for the pool and determines which loan losses were related to loans outstanding at the pool date. The loss rate method then divides the loan losses recognized on loans outstanding as of the pool date by the outstanding loan balance as of the pool date. The Company’s expected loss estimate is anchored in historical credit loss experience, with an emphasis on all available portfolio data. The Company’s historical look–back period includes January 2012 through the current period, on a monthly basis. When historical credit loss experience is not sufficient for a specific portfolio, the Company may supplement its own portfolio data with external models or data. Qualitative reserves reflect management’s overall estimate of the extent to which current expected credit losses on collectively evaluated loans will differ from historical loss experience. The analysis takes into consideration other analytics performed within the organization, such as enterprise and concentration management, along with other credit–related analytics as deemed appropriate. Management attempts to quantify qualitative reserves whenever possible. The Company’s CECL estimate applies to a forecast that incorporates macroeconomic trends and other environmental factors. Management utilized National, Regional and Local Leading Economic Indexes, as well as management judgment, as the basis for the forecast period. The historical loss rate was utilized as the base rate, and qualitative adjustments were utilized to reflect the forecast and other relevant factors. The Company segments the loan portfolio into pools based on the following risk characteristics: financial asset type, loan purpose, collateral type, loan characteristics, credit characteristics, outstanding loan balances, contractual terms and prepayment assumptions, industry of the borrower and concentrations, and historical or expected credit loss patterns. The $20.8 million ACL provision included special allocations related to the potential impact due to the nature and characteristics on certain loan types including, non–owner occupied retail, leisure and hospitality, and unstabilized commercial real estate while continuing allocations for hotels and restaurants, as a result of the COVID–19 business restrictions implemented by the Federal Government and the states in which Horizon operates (Indiana and Michigan). Extensive analysis and monitoring of these portfolios has been undertaken and, while no loss has been specifically identified, the risks to certain borrowers are elevated and, therefore, the special allocation was deemed prudent. Allowance for Loan Losses (Prior to January 1, 2020) Prior to the adoption of ASC 326 on January 1, 2020, the Company calculated allowance for loan losses using the incurred loss methodology. The following tables are disclosures relating to the allowance for loan losses in prior periods. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior one to five years. Management believes using the highest of the one, two or five–year historical loss experience is an appropriate methodology in the current economic environment, as it captures loss rates that are comparable to the current period being analyzed. The actual allowance for loan loss activity is provided below.
| Years Ended December 31
| 2019 |  | 2018
Balance at beginning of the period | $ | 17,820 |  |  | $ | 16,394 |
Loans charged–off: |  |  |
Commercial |  |  |
Owner occupied real estate | 41 |  |  | 109 |
Non–owner occupied real estate | 64 |  |  | — |
Residential spec homes | 3 |  |  | — |
Development & spec land | — |  |  | — |
Commercial and industrial | 755 |  |  | 364 |
Total commercial | 863 |  |  | 473 |
Real estate |  |  |
Residential mortgage | 93 |  |  | 76 |
Residential construction | — |  |  | — |
Mortgage warehouse | — |  |  | — |
Total real estate | 93 |  |  | 76 |
Consumer |  |  |
Direct installment | 208 |  |  | 154 |
Indirect installment | 1,785 |  |  | 1,673 |
Home equity | 319 |  |  | 176 |
Total consumer | 2,312 |  |  | 2,003 |
Total loans charged–off | 3,268 |  |  | 2,552 |
Recoveries of loans previously charged–off: |  |  |
Commercial |  |  |
Owner occupied real estate | — |  |  | 55 |
Non–owner occupied real estate | 15 |  |  | 33 |
Residential spec homes | 5 |  |  | 8 |
Development & spec land | — |  |  | — |
Commercial and industrial | 179 |  |  | 80 |
Total commercial | 199 |  |  | 176 |
Real estate |  |  |
Residential mortgage | 46 |  |  | 27 |
Residential construction | — |  |  | — |
Mortgage warehouse | — |  |  | — |
Total real estate | 46 |  |  | 27 |
Consumer |  |  |
Direct installment | 97 |  |  | 53 |
Indirect installment | 661 |  |  | 505 |
Home equity | 136 |  |  | 311 |
Total consumer | 894 |  |  | 869 |
Total loan recoveries | 1,139 |  |  | 1,072 |
Net loans charged–off | 2,129 |  |  | 1,480 |
Provision charged to operating expense |  |  |
Commercial | 2,165 |  |  | 1,699 |
Real estate | (635) |  |  | (487) |
Consumer | 446 |  |  | 1,694 |
Total provision charged to operating expense | 1,976 |  |  | 2,906 |
Balance at the end of the period | $ | 17,667 |  |  | 17,820 |
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment, and based on impairment analysis as of December 31, 2019 :
| December 31, 2019
| Commercial |  | Real Estate |  | Mortgage Warehousing |  | Consumer |  | Total
Allowance For Loan Losses |  |  |  |  |  |  |  |  |
Ending allowance balance attributable to loans: |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 541 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 541 |
Collectively evaluated for impairment | 11,455 |  |  | 923 |  |  | 1,077 |  |  | 3,671 |  |  | 17,126 |
Loans acquired with deteriorated credit quality | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total ending allowance balance | $ | 11,996 |  |  | $ | 923 |  |  | $ | 1,077 |  |  | $ | 3,671 |  |  | $ | 17,667 |
Loans: |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 7,347 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 7,347 |
Collectively evaluated for impairment | 2,040,299 |  |  | 770,705 |  |  | 150,293 |  |  | 665,952 |  |  | 3,627,249 |
Loans acquired with deteriorated credit quality | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total ending loans balance | $ | 2,047,646 |  |  | $ | 770,705 |  |  | $ | 150,293 |  |  | $ | 665,952 |  |  | $ | 3,634,596 |

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- Definition The entire disclosure for allowance for credit losses. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -URI http://asc.fasb.org/topic&trid=2196771 + Details
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